Cryptocurrency investors are known for being enthusiastic and devoted to their preferred crypto. But right now, there is even greater excitement in the crypto market as the Ethereum Merge draws closer.
Ether, the token attached to the Ethereum blockchain network, has, as of this writing, rallied 12.5% over the last week and has more than doubled since its June lows of $880. Why the excitement? Ether, the world’s second-largest token, recently passed its last test merge (Goerli) before a major upgrade that is scheduled for around September 15.
What Is The Merge?
Ethereum has been working on making big upgrades to its system for about seven years, which is around the time it was created in 2015 by one-time University of Waterloo student Vitalik Buterin.
The Merge is the biggest upgrade in the history of Ethereum and represents a major transition in how Ether tokens are minted and transactions are validated. “The Merge” refers to when the current proof-of-work (PoW) Ethereum protocol will “merge” with the Beacon Chain proof-of-stake (PoS) blockchain system and continue as PoS.
Under PoW, miners solve complex computer problems to win rewards. The first miner to solve the puzzle receives newly minted tokens and transaction fees paid by users of the network. In contrast, PoS works on a consensus method. That means that validators “stake” their coins as collateral to validate transactions and create new blocks. In return, the validator is rewarded a fixed percentage of the pledged assets when a new block of ether is added to the blockchain. This is unique because staking allows investors to generate a yield by putting their token up for collateral. To be a validator a user needs to stake at least 32 ether ($59,968) to be eligible. Many argue this democratizes participation by reducing the large capital expenditures in hardware and significant electricity required for PoW. With PoS anyone with a computer and 32 ether can technically be a miner.
The Merge will also set the stage for more upgrades that will improve Ethereum’s scalability. With the rise in popularity of DeFi and NFTs, the Ethereum network has had significant spikes in gas fees making it costly for users to transact on the blockchain.
Currently, Ethereum has a low rate of Transactions Per Second (TPS), thus reducing mainstream adoption. One scaling upgrade to combat this issue is the concept of sharding. Sharding will split the Ethereum’s network into more pieces (“shards”) to improve its capacity. Some experts predict this upgrade could increase Ethereum’s TPS from ~10 to 100,000.
The excitement around The Merge has resulted in a rally in Ether (the token), as many investors believe the upgrades will increase usage and mainstream adoption.
Investing in Cryptocurrency with Evolve ETFs
Deciding which cryptocurrency to own and how much to allocate can be overwhelming for many investors. The Evolve Cryptocurrencies ETF (TSX: ETC) is Canada’s first multi-cryptocurrency ETF. ETC is designed to be a one ticket solution to cryptocurrency exposure. It is market cap weighted and rebalanced monthly. It currently holds Bitcoin (TSX: EBIT) and Ether (TSX: ETHR) but as regulators approve other crypto ETFs, they may be added as well. For more information on ETC, visit https://evolveetfs.com/etc/.
If you’re looking for crypto specific ETF investment options, Bitcoin ETF (TSX: EBIT) and Ether ETF (TSX: ETHR) offer a great way to access the price of bitcoin and ether respectively. For more information, visit the fund pages here: https://evolveetfs.com/product/ebit/; https://evolveetfs.com/product/ethr/
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